Oriental Holdings Berhad's (KLSE:ORIENT) dividend will be increasing on the 20th of January to RM0.10, with investors receiving 67% more than last year. This takes the dividend yield from 3.8% to 4.5%, which shareholders will be pleased with.
Oriental Holdings Berhad's Payment Has Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, Oriental Holdings Berhad's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.
Over the next year, EPS could expand by 9.6% if recent trends continue. If the dividend continues on this path, the payout ratio could be 42% by next year, which we think can be pretty sustainable going forward.
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The first annual payment during the last 10 years was RM0.09 in 2011, and the most recent fiscal year payment was RM0.20. This implies that the company grew its distributions at a yearly rate of about 8.3% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.
We Could See Oriental Holdings Berhad's Dividend Growing
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Oriental Holdings Berhad has impressed us by growing EPS at 9.6% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Oriental Holdings Berhad's prospects of growing its dividend payments in the future.
We Really Like Oriental Holdings Berhad's Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Oriental Holdings Berhad you should be aware of, and 1 of them shouldn't be ignored. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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